While the banking industry has weathered its share of economic challenges in recent years, the next major threat may be quietly building and it’s not what most banks are stress testing for.
In his recent American Banker op-ed,...
Commercial Real Estate (CRE) lending can be a powerful growth engine for banks—but only when managed strategically. Many banks limit their expansion due to outdated, one-size-fits-all concentration policies that don’t account for their unique capital profile. Instead of restricting growth based on arbitrary regulatory thresholds, banks can quantify their true capital capacity using data-driven analytics.
Your CRE lending strategy should fuel growth, not limit It. Many banks treat the 300% CRE concentration threshold as an ironclad limit, fearing regulatory scrutiny if they exceed it. However, this standard does not consider your bank’s actual capital strength, underwriting quality, or risk appetite.
Instead of a rigid limit, use loan-level and capital stress testing to determine the precise level at which CRE exposure could impact your institution’s survival in a severe downturn. Quantifying this threshold allows you to unlock additional capital for lending while staying well within safe regulatory guardrails. With a customized, data-backed strategy, you can grow CRE lending confidently, without increasing risk.
At Invictus Group, we are committed to helping banks navigate the complexities of CRE risk management. Our expertise enables institutions to assess their unique portfolios and implement strategies that safeguard their financial health amid uncertain times.
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